The 4th Global Surge in Crude Prices
Not only the crude prices (WTI reached $92.2 per a bbl Friday), but also the prices for gold have renewed their records. The gold, for instance, surged above the historical maximum of $780 per an ounce past week. The tricky point is that the crude prices are going up in constant dollars (i.e. adjusted to the U.S. inflation) and in other currencies, including euro.
What’s more, the price for crude calculated in the most eternal equivalent, the gold, is also very high. It was notably higher than today (0.12 oz/barrel) only in 1920. In terms of the gold equivalent, the crude price materially exceeds the average historical level of the last three years. The price has doubled since 1998, when it neared the historical average of roughly 0.06 oz/barrel.
It is not the first surge in the relative prices for crude and gold in the last hundred years. The 20th century had three clear picks of the so-called crude-in-gold growth. The first one happened after the start of the WW1, the second one was triggered once the WW2 ended and the Cold War began, while the third surge was registered after 1973, when the standoff of socialism and capitalism was particularly tough and when the situation in the Middle East was very grave. That wave died away only in 1986, when the Soviet Union finally lost the Cold War.
The supposition that long cycles of the crude-in-gold prices correlate with the geopolitical situation in the world apparently makes some macroeconomic sense. The wars, even the cold ones, radically change preference for the basic economic wealth. From time to time, fuel for tanks becomes more vital than gold in boxes. But the history is yet to name the period of the fourth surge that is currently underway.
www.kommersant.com
All the Article in Russian as of Oct. 29, 2007
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